Diemen / NL. (csm) Dutch CSM N.V. reports higher sales and Ebita before one-off costs in the third quarter of 2012 compared to the third quarter of 2011. Ebita excluding one-off costs amounted to 40,4 million EUR, an increase of 10,1 million EUR. Our focus on margin improvement and cost reductions paid off and was the most important factor in the recovery of our Ebita before one-off costs. Positive currency effects supported both sales and Ebita. One-off costs related to initiatives for structural cost reduction and the strategic transformation of CSM. Key facts:
- Sales for the third quarter were 834,2 million EUR compared with 784,8 million EUR in 2011. Organic sales growth was – 2,7 percent, a combination of higher prices (0,7 percent) and lower volumes (- 3,4 percent). Currency movements had a positive impact of 63,9 million EUR (8,1 percent) largely due to a stronger US dollar. The year-on-year increase in Q3 2012 attributable to acquisitions amounted to 6,9 million EUR (0,9 percent).
- Sales year-to-date increased by 6,5 percent. Sales in constant currencies increased by 0,4 percent. Organic sales growth was -0,4 percent, a combination of lower volumes of 3,1 percent, partly offset by a positive price effect of 2,7 percent. The acquisition effect was 0,8 percent.
- Ebita excluding one-off costs in the third quarter amounted to 40,4 million EUR, an increase of 10,1 million EUR or 33,3 percent compared with the same period in 2011. A strong improvement in North America of 5,9 million EUR at constant currency and positive exchange rate differences of 4,2 million EUR were the main factors behind this increase.
- Ebita year-to-date excluding one-off costs amounted to 114,1 million EUR, an increase of 3,3 percent compared with 2011. Currency movements positively impacted Ebita by 9,5 million EUR compared with 2011.
- The strategic transformation of CSM is progressing according to the timeline set. Related costs of 18,5 million EUR incurred so far are included in the one-off costs.
Commenting on the third quarter results, CEO Gerard Hoetmer said:
«Despite the ongoing challenging trading environment I am pleased we have achieved a further recovery of the underlying results of our company. Based on improved margins and the effects of our improvement program Relevance, our Ebita excluding one-off costs in the third quarter of 2012 increased compared to the third quarter of 2011».
«I am especially pleased with the development of our results in our North American Bakery Supplies businesses; Bakery Products, Caravan Ingredients and BakeMark were all able to improve their Ebita in a market impacted by lower consumer spending».
«In Europe, the consumer trend to switch to lower priced sales channels continued in the Bakery market, impacting our artisan business. In line with their strategy, Bakery Supplies Europe is successfully targeting growth in the out-of-home and in-store bakery channels, while sales in Continental Europe benefited from the experience and know-how of our UK and US activities in these areas. However, this growth could not mitigate the impact of declining volumes in the artisan market, where our objective is to further improve our market shares».
«At Purac, total volumes declined slightly due to a small volume decline in the Food activities which was not fully offset by the volume growth in the Chemicals + Pharma unit. The Food activities are still impacted by a decline in the sale of natural meat preservation solutions in especially low cost meat products, due to legislation changes in 2011 which allowed the use of cheaper chemical based alternatives. The growth achieved in the other food segments could not fully compensate for this decline. The performance of Future CSM, consisting of Purac and Caravan Ingredients, was satisfactory against a background of ongoing tough market situation. Ebita at both Purac and Caravan Ingredients increased in Q3 compared to Q3 2011».
«We have covered most of our raw materials for the remainder of 2012. We will continue to respond to changing consumer preferences towards lower cost/better value products. Our Relevance restructuring program is on track and is contributing to the improved results. As announced previously, savings in full year 2012 will exceed the original target of 30 million EUR of savings in 2012».
«The recently announced joint venture with BASF to develop a market leader position in bio-based succinic acid is an important step forward in the execution of our strategy to develop CSM into a biobased ingredients company».
«I want to express my sincerest thanks and appreciation to all the employees who are continuing to focus on serving our customers and driving results in these challenging times and also adapting successfully to major changes in our organization».
Strategic transformation of CSM
The strategic transformation of CSM is developing according to plan with the Information Memorandum regarding the Bakery Supplies activities being sent out to selected potentially interested parties as of today.
The Information Memorandum includes both historical and forward looking information. The forward looking statements for the business intended to be sold show consistent sales growth for the Bakery Supplies business for the next few years, at least in line with expected growth of the bakery markets. We expect the European and North American bakery markets to continue to grow approx. in line with GDP and in the emerging markets to grow faster than GDP.
Margins for the business intended to be sold are expected to strengthen, particularly in our North American business. As a result of our Relevance program and continued strict cost control, expenses expressed as a percentage of sales are expected to decrease in the next few years. Expense control and efficiency improvements are supported by capital investments. Working capital and capital expenditure requirements are expected to remain in line with recent years.
Bakery Supplies North America
Net sales decreased compared to last year as a result of lower volumes sold. Lower consumer spending across all channels negatively impacted sales, Based on available market data we believe that we are at least maintaining market share. Organic growth was -1,6 percent as a result of a negative volume effect of 2,8 percent and a positive price/mix effect of 1,2 percent.
Ebita excluding one-off costs improved strongly compared to Q3 last year by 9,5 million USD. The Ebita effect of lower volumes was compensated by better margins, growth of our Ebita was subsequently realized by lower warehousing and distribution costs as well as lower SG+A costs. Our initiatives to reduce the overall cost level through the Relevance program are paying off.
Bakery Supplies Europe
Sales in Bakery Supplies Europe increased in the 3rd quarter by 0,8 million EUR (0,3 percent) compared to last year. Organic growth was negative 4,4 percent as a result of a negative volume effect of 5,6 percent and a positive price/mix effect of 1,2 percent. Our sales are in line with the trend in the market with volume decreases in the artisan and industry channels whereas out-of-home and in-store bakery increased. The lower volume reflected a combination of a continued tough market environment and a non-recurring push in targeted promotional activities in the artisan channel in September 2011. This resulted in a temporary boost to Q3 2011 volumes. The impact on sales from acquisitions was 6,9 million EUR.
Ebita excluding one-off costs was 0,3 million EUR lower than Q3 2011. We are still confronted with the impact on Ebita from lower sales as a result of lower demand in especially our profitable artisan channel. This effect and inflationary cost increases are largely compensated by better margins and the cost savings from the Relevance program.
Purac
Q3 sales increased by 3,4 percent (3,5 million EUR) compared to 2011. Currency effects impacted sales positively by 5,8 percent. Organic growth was -2,4 percent as a result of a negative volume effect of 1,6 percent and a negative price/mix effect of 0,8 percent. Increased volumes in Chemicals and Pharma partly compensated the decrease in our Food activities. Meat preservation sales are still under pressure due to the allowance to using cheaper chemical based alternatives.
Ebita excluding one-off costs increased by 1,3 million EUR compared to 2011. A better sales mix, Relevance savings and positive currency effects more than compensated increased costs incurred to support various growth initiatives, for example our lactide factory in Thailand and increased FTEs in marketing and innovation.
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